lastnightinvegas

Potential Uses for $700 billion

2008-09-22T14:04:00.000-07:00

To put that number in context, here are two other uses for the $700 billion Paulson would like to spend on a bailout.

1.) Purchase the following companies

American Express 42.79
Citi Group 107.27
General Motors 7.09
JP Morgan Chase 143.77
Morgan Stanley 31.01
Wachovia 35.24
Goldman Sachs 53.19
Bank of America 159.83
Ambac 1.02
Washington Mutual 5.61
Wells Fargo 115.5
Total 702.32

2.) Take the $700 billion and write a check to each and every taxpayer for $5,000

Uh-Oh! Markets could open today at 2pm?

2008-09-14T12:55:00.000-07:00

A source says that the markets may be opened today at 2pm. Apparently they are manning the desks across the country at this moment. Lehman is obviously the major cause but is anyone / anything else involved? Updates to come...

Biggest decline since the Great Depression

2008-09-05T17:50:00.000-07:00

In an interview on Yahoo, Robert Schiller mentions that prices may decline further (on a percentage basis) than during the great depression. While that may be the case, I would like to know how quickly prices grew in the late 1920s prior to the decline. I've been searching for data and it seems like there is little reliable information prior to around 1950 in the US. If anyone does find any, please let me know.

It seems to me if there is a temporary unsustainable increase in prices--whether it be housing or any other market--it is a completely different situation from a true dramatic drop. That is, it would be much more apocalyptic if prices are clipping along and then suddenly dropped dramatically. With respect to the current devaluation, prices jumped due to speculation, an historic financing environment and a lot of overzealous and naive buyers.

It's not as if home prices just dropped out of nowhere. They are merely reverting to sustainable levels; we are still above the historic trend. Silver prices dropped dramatically after the Hunt Silver bubble because the market was artificially high. Houses too were artificially high and are now reverting to where the market should be.

In short, I wish people referred to the current market as a housing price adjustment as opposed to crash.

This is the end, my only friend the end.

2008-08-29T13:04:00.000-07:00

If the 5% rate Wamu is offering on CDs isn't indication enough that there's trouble brewing, the fact that Wamu is promoting it with a hand drawn white board sign certainly clinches it.

Photo taken at corner of Hualapai and Charleston Blvd, Las Vegas, Nevada.

The SEC is also cracking down on these...

2008-08-27T14:38:00.000-07:00

Case Schiller

2008-08-27T00:11:00.000-07:00

The S&P / Case Schiller home price index was released earlier today. Continuing the recent trend Las Vegas leads the pack and actually beats its May year-over-year decline of 28.4% with a June YOY drop of 28.6%.

People are calling for a bottom, but I just don't see it happening. Until the demand for housing increases, prices can't rise. The tighter lending standards remove a portion of potential buyers from the market. The decreased property value force a big group to stay put until they can at least break even. Combined, the two groups make a big chunk of the market and it will take years for the rest of the potential buyers to overcome the lost demand and push prices upward.

Las Vegas #8, acording to Forbes

2008-08-21T12:14:00.000-07:00

According to one of Forbes many lists, Las Vegas ranks the eighth best real estate market for commercial investment.

"Even during the height of the real estate boom from 2004 to 2006, international investors were wary of gambling in Vegas real estate. In 2006, the city was only the 16th most popular locale for international money. But since the market has turned south--and projects ranging from residential complexes to casinos and offices have suddenly stalled--international investors are starting to look for big discounts." (story)

Las Vegas continues to grow as the residents move away from the rust belt to the Southwest and the Southeast. As the population grows, there is a need for more homes, more jobs are created, more office and retail is needed. So, it makes sense the Vegas is a better long term bet than Cleveland with a shrinking and aging population.

That said, the deals and steals aren't really presenting themselves in this market to date. Buyers are choosing to hold on to property until the market improves rather than sell at fire sale prices. I can't see that changing until buyers start to feel a little pain. As vacancy rises and buyers have to start coming out of pocket to cover the debt service or see that it's going to cost hundreds of thousands of dollars to re-tent a space because supply is so great that tenants are dictating terms, then we may see some real opportunities.

Quote of the Day

2008-08-20T12:48:00.000-07:00

"I didn't think companies could overstate REVENUES by more than six billion dollars, and these clowns were overstating profits by that amount. (Why aren't a lot of people in jail over this?)"

- Barry Ritholtz at the Big Picture regarding Fannie Mae's accounting issues.

Can you say recession

2008-08-19T12:07:00.000-07:00

Watch this video. It is a quick lesson on the way GDP and Inflation is calculated by the US government and how those statistics have been skewed over the years. (Click on the picture below)

The current downturn doesn't seem to jive with the economic data released to date. It may be that most of what we are seeing is just noise and anecdotal evidence pushed by the media trying to shock the audience. As you will see it may be more than that.

Credit Crunch

2008-08-13T11:18:00.000-07:00

Everyone feels like borrowing on commercial real estate has become more difficult. Let's quantify that feeling. Here is a chart (thanks TBP) showing the percentage of commercial lenders who have tightened lending standards.

At first glance, that 4 out of 5 commercial RE lenders needed to tighten their lending standards seems astronomical. But, as anyone who was either lending or borrowing over the last few years can attest, that number should probably be closer to 99%.

Here's a quick list of a couple lending practices that may not be available to borrowers again any time soon: Valuing leases that are not signed, sending your underwriting analysis to the borrower so the borrower can adjust analysis prior to loan committee, counting a seller provided rent guaranty as rental revenue, ignoring the PSA between seller and buyer in-lieu of a PSA between the buyer and a new buyer entity adding 5%, 10% or even 20% to the value of the property with the stroke of a pen.